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Reliance Industries was buzzing in trade on Monday, following its Q1 results as well as developments around the annual general meeting (AGM) held last week.
The Mukesh Ambani-promoted company, at the AGM, unveiled a feature phone that will be available for its users for effectively free of cost. A refundable security deposit of Rs 1,500 will have to be paid while availing the handset, which will be returned after 36 months.
The company’s earnings surpassed analysts' expectations on Thursday as consolidated profit grew by 12.7 percent sequentially (up 28.3 percent YoY) to Rs 9,079 crore in Q1 FY18, driven by one-time gain and robust growth in petchem & refining businesses.
Revenue from operations during the quarter declined 2.5 percent to Rs 90,537 crore QoQ but increased 26.7 percent year-on-year.
"Industry leading portfolio of assets in the refining and petrochemicals business contributed to considerable improvement in earnings for the quarter," Mukesh Dhirubhai Ambani, Chairman and Managing Director said.
Gross refining margin for the quarter grew by 3.5 percent to 9-year high of USD 11.9 a barrel against USD 11.50 a barrel on a sequential basis.
Singapore GRM was flat at USD 6.40 a barrel QoQ as lower cracks for light and middle distillates were offset by stronger fuel oil cracks and lower freight, it said.
Major global brokerages have retained their positive stance on the stock, while highlighting a pickup in monetisation plans, along with EPS upgrades due to the introduction of the phone.
Brokerage: Citi | Rating: Buy | Target: Rs 1,750
Citi observed that the upfront deposit for JioPhone is higher than the average feature phone price. It forecast an EBITDA CAGR of 14 percent ex-Jio and 25 percent including Jio over FY17-20.
Brokerage: Morgan Stanley | Rating: Overweight | Target: Increased to Rs 1,823
The brokerage highlighted that the company’s monetisation plans were picking up pace, while energy margins were driving upside surprises. The capex run rate has slowed and free cash flow drag have almost halved in Q1. It projects positive FCF by mid-2018 by mid-2018.
Brokerage: Bank of America Merrill Lynch | Rating: Neutral | Target: Rs 1,585
The global brokerage firm said that much of the value for Jio is now discounted in the stock. Further, the telecom profitability may take some time, it added.
Brokerage: CLSA | Rating: Buy | Target: Rs 1,920
The brokerage said that feature phones drive 1-24% EPS upgrades. It has raised Jio’s EBITDA by well over USD 1 billion for FY18-20. The strong demand for 4G feature phones and start of key projects are potential catalysts.
Brokerage: JPMorgan | Rating: Neutral | Target: Rs 1,460
The global research firm raised EPS estimates by 4-8 percent, driven by higher gross refining margins and petchem spreads. The key downside risks include continued extension of discounting schemes.
Brokerage: Kotak Institutional Equities | Rating: Downgrade to Reduce |: Target: Rs 1,500
Remain wary of high capex run-rate & rising net debt levels and added that debt may take time to reduce.
Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
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